How Trading Fees Work: Handling and Overnight Fees

What is a trading fee

Trading fees are charged by an exchange or a trading platform in order to maintain and sustain the platform’s operational activities. Users are charged in different ways and at varying prices on different platforms.

Why do traders need to pay fees

Trading fees must be paid before transactions can be completed. Some orders require a large amount of capital to process, while others require the platform or broker to provide traders with upfront capital to enhance their purchasing power.

As a result, fees are compensation for the operational activities required by the trading platform to fulfil orders.

What type of fees do traders need to pay

A. Transaction/handling fees

A transaction fee is a mechanism used by various platforms to deliver innovative enhancements to the platform’s product offerings. Leverage is the variable being charged; the higher the leverage, the higher the transaction cost.

Transaction fees work in a similar way to how some financial institutions charge interest on a loan. The bigger the loan amount, the higher the interest rate.

Because leverage is basically borrowed money, the platform (broker) would be required to pay the difference between the original capital (margin) and the entire price of the position as part of the order placing process.

If the user’s order is in a high-leverage position, the platform or broker will need to invest a significant amount of money to complete it. As a result, the transaction fee is a mechanism for the broker to cover the risk that is undertaken

At SnapEx. a user can get a full rebate on transaction fees using Snap points. For more information about Snap Points, please click here.

B. Overnight fees

The overnight fee, often known as the rollover fee, is recognised by most CFD traders. It is charged by the exchange or trading platform for holding a buy or sell position overnight.

This fee is calculated as an interest payment to cover the expense of overnight leverage. The interest is calculated daily and is also depending on the contract’s value.

If you plan to hold one or more orders open over a long period of time, please ensure that you have an adequate balance of funds left in your trading account. This is to avoid your orders being forcibly liquidated if the Overnight Fees are larger than your available margin.

Different trading platforms and exchanges have different ways to charge overnight fees. At SnapEx, the Overnight Fee will be charged at 6:00 (GMT+8, Singapore time) daily. The fee will be equivalent to Margin x (Leverage – 1) x 0.045%.

For more information about SnapEx overnight fees, please click here

C. Blockchain fees

Blockhain fees, also known as mining fees, are charged by various networks such as bitcoin and Ethereum. These fees are provided to these miners as compensation for maintaining the ecosystem; they do so by devoting their computer power and electricity to processing and securing all transactions made within the network.

When there is a high volume of transactions in the network, the cost rises since more resources are required to keep the transactions running. The fees also serve to prevent spam transactions from being conducted, ensuring the network’s stability and security.

Why fees are different from one platform to another

In order to run the business model, different platforms use different pricing mechanisms. SnapEx provides one of the lowest fees in the crypto industry, as seen above, with no hidden transaction costs or additional charges for closing a position.

Conclusion

Having a thorough grasp of trading costs can help you save a significant amount of money on your trading activities, therefore picking the right platform when you first start trading is essential.

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